British Consumer Confidence Slips to New Decade Low in late May

The consumer confidence levels in the United Kingdom continue to be at a decade low level, GfK (Growth from Knowledge), in a survey conducted in the country has found that the sentiments of average British consumers are at a new low in a decade since the 2008-9 era financial crisis. The index which stood at -34 for the first two weeks of May 2020, slipped further to -36 for the last two weeks of the month, this is the lowest figure reported since January 2009. The pandemic ensued lockdown, and the uncertainty regarding when the country will be fully able to shake off the virus has kept the country on its toes. GfK which now publishes its consumer confidence numbers every two weeks had reported that the consumer confidence index for the first fourteen days of May slipped to -34 from -33, the level it was for the second half of April 2020. The organisation’s other index, The Major Purchase Index however improved compared to the previous month to stand at -47 but is still way below where it was a year ago. The GFK indexes are not the only one which has been painting a gloomy picture of the British economy, but major government organizations like Office of National Statistics and Office of Budget Responsibility have also come out with a forecast of a tough road ahead for the economy.

The pandemic has brought about a situation that very few have in the country have experienced in their lifetimes. Being forced to stay indoors has particularly impacted the small-time unskilled, and semi-skilled people in the country. These are the people who are very much dependent on their weekly earnings to feed themselves and forms the largest chunk of the working class in the country. Since the time the pandemic hit the country business activity started to go-slow and when the lockdown was imposed the business activity in the country came to almost at a standstill. The government though did come to the rescue of these people by paying about 80 per cent of their salaries and insisting upon their employers from firing them, but the threat of unemployment is still looming large as several of the businesses in the country are not expected to make it through the lockdown. The country till now has seen nearly a third of its workforce being put under the benefit of its furloughing scheme and another around 2 million registering for unemployment benefits. Hardly an encouraging sight, but the expectations are that it might get even worse from here. It is thus a very uneventful situation for someone who would try to anticipate for his future livelihood. The consumer confidence levels in a country is a reflection of that, and the way the future economic environment is being envisioned by eminent financial and economic institutions, the mood of the people could very well take a further dip.

Even before the pandemic had hit the country, the consumer confidence condition was not very encouraging. For the past three years, the country had been embroiled in a bitter negotiation with the European Union regarding the modalities of the Brexit pull-out. The constant bickering among negotiators on both sides had created an environment of uncertainty that was significantly affecting the business sentiments across the continent. However, towards the end of 2019 when consensus emerged regarding the pull-out, and both sides eventually managed to part ways on 31^st January 2020, all seemed to have ended well. Since the mood of December 2019, most of the major leading economic indicators of the country started to look up and did so till February of 2020 when the pandemic started to knock on the doors. The financial crisis period though had seen a very sharp fall in the country’s consumer confidence levels but not for such an elongated period. Consumer confidence levels remaining low for such long periods adversely affected the employment and economic growth situation of the country.

Two sectors which are major components in the measurement of consumer confidence, the retail sector and the housing sector have a story to tell in the falling confidence levels of the average British citizen. The retail sector, except for the online retailing segment, has been underperforming grossly since the lockdown came into place. In the online retailing segment also only the groceries and essential items have been seeing a good turnover, whereas the rest are witnessing a very slow movement. People during the pandemic are trying their best to live on basic minimums while conserving for the future. Credit card and debit card providing companies have also been reporting that during the lockdown, large scale behavioural changes are being witnesses with less money being spent on non-essentials, as consumers are progressively trying to pay off their credit card debt on the money saved. The housing sector, in fact, has been witnessing a shift in preference of people. It has been witnessing a large number of listings of houses in London while a large number of people are also showing interest in purchasing properties away from the city. This behaviour is largely being seen as an indicator of people’s perception of what they perceive the future will be like when the dust settles on the pandemic.

The government recently announced a graded waiver in the lockdown conditions. The three-stage withdrawal programme places social distancing measures at its centre with a keen eye on the spiking up of the number of infections. Now the situation with the coronavirus infection is such that we will have to live with it for a long time at least till every citizen receives a vaccine shot, which will provide him with long-term protection. In the meantime, some form of social distancing measure will have to be continued whether there is lockdown imposed or not. Life would not be as usual as it was prior to March 2020 and so will be the spending behaviours of the people.